Q2 2025 CH Robinson Worldwide Inc Earnings Call

Paul (Operator): Good afternoon, ladies and gentlemen, and welcome to the C. H. Robinson Second Quarter 2025 Conference Call. At this time, all participants are in a listen-only mode. Following the company's prepared remarks, we will open the line for a live question and answer session. To ask a question, please press star one on your telephone keypad. If anyone needs assistance during this time, please press star zero. As a reminder, this conference is being recorded on Wednesday, July 30th, 2025. I would now like to turn the conference over to Chuck Ives, Senior Director of Investor Relations.

Good afternoon, ladies and gentlemen, and welcome to the C.H. Robinson Worldwide, Inc. second quarter 2025 conference call.

At this time, all participants are in a listen-only mode. Following the company's prepared remarks, we will open the line for a Live question and answer session to ask a question. Please press star 1 on your telephone keypad, if anyone needs assistance during this time, please press star zero.

As a reminder, this conference is being recorded on Wednesday, July 30th, 2025. I would now like to turn the conference over to Chuck Ives, Senior Director of Investor Relations.

Chuck Ives: Thank you, Paul, and good afternoon, everyone. On the call with me today is David Bozeman, our President and Chief Executive Officer; Michael Castagneto, our President of North American Surface Transportation; Arun Rajan, our Chief Strategy and Innovation Officer; and Damon Lee, our Chief Financial Officer. I'd like to remind you that our remarks today may contain forward-looking statements. Slide two in today's presentation lists factors that could cause our actual results to differ from management's expectations. Our earnings presentation slides are supplemental to our earnings release and can be found in the Investor section of our website at investor.chrobinson.com. Today's remarks also contain certain non-GAAP measures, and reconciliations of those measures to GAAP measures are included in the presentation. With that, I'll turn the call over to Dave.

Thank you, Paul, and good afternoon, everyone on the call with me. Today, we have Dave Bozeman, our President and Chief Executive Officer; Michael Castagnetto, our President of North American Surface Transportation; Arun Rajan, our Chief Strategy and Innovation Officer; and Damon Lee, our Chief Financial Officer.

I would like to remind you that our remarks today may contain forward-looking statements.

Slide 2, in today's presentation list factors that could cause our actual results to differ from Management's expectations.

earnings, presentation, slides are supplemental to our earnings release and can be found in the investor section of our website at

Today's remarks also contain certain non-gaap measures and reconciliations of those measures to gaap measures are included in the presentation.

Dave Bozeman: Thank you, Chuck. Good afternoon, everyone, and thank you for joining us today. When the current transformation of C. H. Robinson began in early 2024, with the implementation of a new lean operating model, we recognized that some people had doubts and didn't understand how this would enable the company to change its trajectory. Now, with six consecutive quarters of consistent outperformance through the disciplined execution of the strategy that we shared at our 2024 Investor Day, there is no doubt in our minds that we are on the right path to deliver sustainable outperformance in all market cycles. I'm proud of the Robinson team for embracing our new operating model and the discipline needed to improve our say-to-do ratio and to generate higher highs and higher lows across market cycles.

With that, I'll turn the call over to Dave.

Thank you, Chuck.

Good afternoon, everyone, and thank you for joining us today.

When the current transformation of CH Robinson began in early 2024 with the implementation of a new lean operating model.

We recognize that some people had doubts and didn't understand how this would enable the company to change its trajectory.

Now with 6 consecutive quarters of consistent, outperformance, through the discipline, execution of the strategy that we shared at our 2024 investor day.

There is no doubt in our minds that we are on the right path to deliver sustainable outperformance in all market cycles.

Dave Bozeman: Our people consistently demonstrate that they are the industry's best logisticians with the value that they bring to our customers and carriers, and they are excited about the transformation happening at Robinson and the momentum that we have. We are not waiting for a market recovery to improve our financial results, and the strategies that our Robinson team is executing are not only working, but they are built to be effective in any market environment. We're still in the early innings of our transformation journey, but we have demonstrated our ability to responsibly grow market share and expand margins at the same time. This has enabled us to approach our mid-cycle operating margin targets despite operating in an elongated trough of the freight cycle. We are accelerating our progress by harnessing and scaling the evolving power of AI to drive automation across the full lifecycle of a load.

I'm proud of the Robinson team for embracing our new operating model and the discipline needed to improve our say do ratio and to generate higher highs and higher lows across Market Cycles.

Our people consistently demonstrate that they are the industry's best logisticians with the value that they bring to our customers and carriers and they are excited about the transformation happening at Robinson and the momentum that we have.

We are not waiting for a market recovery to improve our financial results and the strategies that our Robinson team is executing are not only working, but they are built to be effective in any Market environment.

We're still in the early Innings of our transformation Journey.

We have demonstrated our ability to responsibly grow market, share and expand margins at the same time.

This has enabled us to approach our mid-cycle, operating margin targets. Despite operating in an elongated, trough of the freight cycle,

Dave Bozeman: Our industry-leading innovations not only enhance the service and value we deliver to our customers but also improve our operational performance by automating tasks that free up our talented people to focus on more strategic, high-value work. We are pioneering new ways to eliminate tasks, augment our capabilities, and supercharge our talented people with industry-leading technology that materially elevates the customer and carrier experience. And our lean operating model enables us to do this in a disciplined way that delivers the most value to all of our stakeholders. And you can expect the next chapters of this company's evolution to be just as exciting as the last 18 months. Shifting to our Q2 results, in Nast, we outgrew the market again in both truckload and LTL while expanding gross margins and improving productivity year over year and sequentially.

we are accelerating our progress by harnessing and scaling the evolving power of AI to drive automation across the Fool's life cycle of a load.

Our industry-leading innovations not only enhance the service and value we deliver to our customers.

Pass the free of our talented people to focus on more strategic high-value work.

We are pioneering new ways to eliminate task.

Augment our capabilities and supercharge our talented people with industry-leading technology that materially elevates the customer and carrier experience. Our lean operating model enables us to do this in a disciplined way that delivers the most value to all of our stakeholders.

And you can expect the next chapters of this company's Evolution to be just as exciting as the last 18 months.

Shifting to our Q tube results.

Dave Bozeman: In Global Fording, we continue to win new business and improve the yield of our portfolio by beginning to implement the revenue management disciplines that we've been utilizing in Nast for over a year. We also optimized our Global Fording expenses through further increases in productivity. Overall, we delivered a 21% year-over-year increase in our enterprise's Q2 income from operations, and we will continue to lean into the self-help initiatives that enabled our Q2 market share growth and margin expansion. From a macro standpoint, fluid trade policies continue to create uncertainty, making planning activities more difficult for our over 83,000 customers around the world. For some of them, tariffs caused them to reduce their import volumes. For instance, when US tariffs on Chinese goods increased to 145% in April, numerous retailers limited imports to only essentials needed for fall, like back-to-school products.

In Nast. We outgrew the market again in both truckload and LTL while expanding gross margins and improving productivity year-over-year and sequentially.

In Global 40, we continue to win new business and improve the yield of our portfolio by beginning to implement the revenue management disciplines that we've been utilizing in NAS for over a year.

We also optimized our global forwarding expenses through further increases in productivity.

Overall, we delivered a 21% year-over-year increase in our Enterprises Q2 income from operations, and we will continue to lean into the self-help initiatives that enabled our Q2 market share growth and margin expansion.

From a macro standpoint fluid, trade policies. Continue to create uncertainty making planning activities, more difficult for our over 83,000 customers around the world.

Dave Bozeman: Others accelerated shipments to beat tariff deadlines from Southeast Asia, and some stuck to their standard peak season schedules, taking a more wait-and-see approach. Although we're approaching the traditional retail peak season for ocean, the industry may not see traditional peak volumes as some retail customers are working through inventories and being highly selective and strategic about bringing in only the essential products they must import. We saw this dynamic with back-to-school ordering, and that trend is continuing as uncertainty about trade deals continues to shape customer behavior. But these periods of volatility reinforce C. H. Robinson's value proposition. There is a flight to quality right now, and that is Robinson. Customers need a partner who not only understands how to navigate increasing complexity but who can also partner with them to solve their unique supply chain challenges, especially amid persistent uncertainty and change.

For some of them tariffs cost them to reduce their import volumes. For instance, when us tariffs on Chinese Goods, increase to 145%, in April numerous retailers limited Imports to only Essentials needed for fall like back to school products.

Others accelerated shipments to be tariff deadlines from Southeast Asia and some stuck to their standard peak season schedules. Taking a more wait and see approach.

Although we're approaching the traditional retail peak season for ocean.

The industry may not see traditional Peak volumes. As some retail customers are working through inventories and being highly selective. And strategic about bringing in only the essential products, they must import.

We saw this Dynamic with back to school ordering, and that trend is continuing as uncertainty, about trade deals continues to shape customer Behavior.

But these periods of volatility reinforced CH Robinson's value proposition.

There is a flight to Quality right now, and that is Robinson.

Customers need a partner who not only understands how to navigate increasing complexity.

Dave Bozeman: We've been doing this for over a century, and with our scale, breadth of services, differentiated experience, and financial stability, we are built to lead through disruption and to help our customers adapt just as quickly as we do to changing market dynamics. During the quarter, we continue to lead the industry in this era of digital enablement, including expanding our suite of cutting-edge, self-serve digital solutions to enable faster and more effective navigation of our global trade complexities. Our new US tariff impact analysis tool empowers US importers to assess their overall duty exposure and drill down to the SKU level for precise cost analysis. We also saw a surge in demand for our ACE Import Intelligence tool, a proprietary self-serve compliance platform that gives importers greater visibility and control over their customs data.

But who can also partner with them to solve their unique supply chain challenges, especially amid persistent uncertainty and change.

We've been doing this for over a century and with our scale breadth of services, differentiated experience and financial stability. We are built to lead through disruption and to help our customers adapt just as quickly as we do to changing market dynamics.

During the quarter, we continue to lead the industry in this era of digital enablement, including expanding our suite of cutting-edge, self-served digital solutions to enable faster and more effective navigation of our global trade complexities.

Our new US, tariff impact analysis tool. Empowers us importers to assess their overall Duty exposure and drill down to the SKU level for precise cost analysis.

Dave Bozeman: Together, these two tools provide an unmatched view into both historical compliance and future-facing tariff strategy, helping importers manage every stage of the import lifecycle with precision. Additionally, in Q2, we announced the expansion of our proven item-level solutions to all global customers, offering unmatched visibility and control over every SKU across their supply chains. These tools, built on years of experience with complex global shippers, reduce blind spots, increase agility, and deliver measurable savings. In today's volatile environment, scaling this capability reinforces our leadership in digital logistics and our ability to connect data-driven insights with real-world execution. We'll continue to help our customers strategize on how to make their supply chains most efficient and cost-effective. Our strategic initiatives remain on track. We've been preparing for a variety of market scenarios, and we're intensifying our strategic focus on market outgrowth, gross margin expansion, and operating leverage improvement.

We also saw a surge in demand for our Ace. Import intelligence tool, a proprietary self-served compliance platform that gives importers greater visibility and control over their Customs data.

Together, these two tools provide an unmatched view into both historical compliance and future-facing tariff strategy.

Helping importers manage every stage of the import life cycle with precision.

Additionally, in Q2, we announced the expansion of our proven item level solutions to all Global customers.

Offering unmatched visibility and control over every SKU across their supply chains.

These tools built on years of experience with complex, Global shippers, reduce blind spots, increase agility and deliver measurable savings.

In today's volatile environment.

Reinforces our leadership in digital Logistics.

And our ability to connect data-driven insights, with real world execution.

We'll continue to help our customers strategize on how to make their supply. Chains most efficient, and cost-effective.

Our strategic initiatives remain on track.

We've been preparing for a variety of Market scenarios and we're intensifying our strategic Focus or Market outgrowth.

Dave Bozeman: And while we are not immune to global market dynamics, we remain confident in our strategy and our people. The consistent, disciplined execution of our strategy, supported by the Robinson operating model, makes us stronger, and we'll stay focused on providing differentiated service to our customers and carriers. I'll turn it over to Michael now to provide more details on our Nast results.

Gross margin expansion and operating leverage Improvement.

And while we are not immune to global market dynamics, we remain confident in our strategy and our people

The consistent discipline, execution of our strategy, supported by the Robinson. Operating model makes us stronger and we'll stay focused on, providing differentiated service to our customers and carriers.

I'll turn it over to Michael. Now, to provide more details on our Nas results.

Michael Castagnetto: Thanks, Dave, and good afternoon, everyone. As Dave mentioned, the Nast team delivered market share growth in both truckload and LTL in Q2 and further optimized our volume, resulting in year-over-year expansion of our gross and operating profit margin. Once again, we delivered this outperformance in the midst of a historically long freight recession, underscoring the strength and resilience of our model and people. For more context, the CAS Freight Shipment Index declined on a year-over-year basis for the 11th consecutive quarter in Q2 and was down 3.4%. Our overall Nast volume, on the other hand, increased approximately 1% year-over-year. Truckload volume was flat year-over-year, and LTL volume was up approximately 1.5%. All of these outpaced the CAS index. Sequentially, truckload volume for business day grew approximately 4.5%, and LTL volume for business day grew 2.5%.

Thanks, Dave and good afternoon everyone.

As Dave mentioned, the nas team delivered market share growth in both truckload and LTL in Q2.

and further optimized our volume, resulting in year-over-year expansion of our gross and operating profit margin.

once again, we delivered this outperformance in the midst of a historically long Freight, recession underscoring, the strength and resilience of our model and people

For more context.

The cast freight shipment index declined on a year-over-year basis for the 11th consecutive quarter in Q2 and was down 3.4%.

Our overall mass volume, on the other hand, increased approximately 1% year-over-year.

And LTL volume was up approximately 1.5%.

All of these outpaced the Cash Index.

Michael Castagnetto: At the same time that market volumes have declined, load-to-truck ratios are higher than they were a year ago, and route guide depth in our managed solutions business has increased over the past year, reflecting an exit of capacity that has brought us closer to better balance in the market. The result of this has been a year-over-year increase in the truckload line haul cost per mile, excluding fuel surcharges. Supported by our operating model and armed with industry-leading tools, our team of freight experts continues to respond to the challenging freight environment with pricing discipline and a cost of higher advantage. All of this led to improvement in the AGP yield in both our truckload business and our LTL business, resulting in an 80 basis point year-over-year improvement in our Nast gross margin.

Sequentially truckload volume for business day, grew approximately 4.5% and LTL. Volume for business day, grew 2.5%.

At the same time that market volumes have declined load the truck ratios are higher than they were a year ago and Route guide depth in our managed Solutions business has increased over the past year.

Reflecting an exit of capacity that has brought us closer to better balance in the market.

The result of this has been a year-over-year increase in the truckload line. Haul costs per mile, excluding fuel search charges

Supported by our operating model and armed with industry-leading tools. Our team a freight experts continues to respond to the challenging Freight environment with pricing discipline and a cost of higher advantage.

Michael Castagnetto: Our team continues to actively assess the market and optimize for the most effective combination of volume and margin to enhance earnings performance. With strategic agility built into our model, we have the flexibility to pivot toward volume or margin as market dynamics evolve, making disciplined, data-driven adjustments in real time, all by staying focused on long-term value creation. We're also making smarter use of our proprietary digital capabilities and getting actionable data into the hands of our freight experts faster, enabling them to make better decisions and to capture the optimal freight for us. Additionally, these digital capabilities have enabled us to increase our Nast shipments per person per day at a double-digit pace over the past two-plus years, and that momentum continued in Q2. Since the end of 2022, we have delivered a more than 35% increase in productivity.

All of this led to Improvement in the AGP yield in both our truckload business and our LTL business resulting in an 80 basis. Point year-over-year, improvement in our Nast, gross margin,

Our team continues to actively assess the market and optimized, for the most effective combination of volume and margin to enhance earnings performance.

With strategic agility built into our model, we have the flexibility to Pivot toward volume or margin as market dynamics evolve.

Making disciplined, data-driven adjustments in real time.

All while staying focused on long-term value creation.

We're also making smarter use of our proprietary digital capabilities and getting actionable data into the hands of our freight experts faster, enabling them to make better decisions and to capture the optimal freight for us.

Additionally, these digital capabilities have enabled us to increase our Nast shipments per person per day at a double-digit pace over the past, 2 plus years and that momentum continued in Q2.

Michael Castagnetto: This enhanced efficiency is not only lowering our cost to serve, but is also elevating the customer experience by enabling faster, more reliable service. As a result of executing on our strategies, our Nast operating margin of approximately 38% in Q2 increased both year-over-year and sequentially. Regardless of market conditions, we remain focused on what we can control. Our people and their unmatched expertise enable us to deliver exceptional service and greater value to our customers and carriers. In line with our disciplined and focused approach to capture growth opportunities in targeted customer segments, we recently announced the expansion of our ISO certification, which enhances our ability to meet rigorous quality standards in the healthcare logistics sector. We've also adapted our solutions to match our customers' supply chain needs and invested in capabilities such as drop trailer, cross-border, short haul, and Robinson managed solutions.

Since the end of 2022, we have delivered a more than 35% increase in productivity.

This enhanced efficiency is not only lowering our cost to serve, but is also elevating the customer experience by enabling faster more reliable service.

As a result of executing on our strategies, our Nas, operating margin of approximately 38% in Q2 increase both year-over-year and sequentially.

Regardless of market conditions, we remain focused on what we can control.

Our people and their unmatched expertise enable us to deliver exceptional service and greater value to our customers and carriers.

In line with our disciplined and focused approach to capture growth opportunities and targeted customer segments. We recently announced the expansion of our ISO certification, which enhances our ability to meet rigorous quality standards in the Healthcare Logistics sector.

Michael Castagnetto: And we will continue to deliver the industry-leading solutions and flexibility that only a scaled broker can provide to customers and carriers. In what continues to be a challenging marketplace, our people are relentlessly driving improved results, powered by their unwavering commitment to our customers and carriers and fueled by their growing adoption of the Robinson operating model and cutting-edge tools. With that, I'll turn it over to Arun to provide an update on the innovation we're delivering to strengthen our customer and carrier experience and improve our gross margin and operating leverage.

And we will continue to deliver the industry-leading solutions and flexibility that only a scaled broker can provide to customers and carriers.

In what continues to be a challenging Marketplace? Our people are relentlessly. Driving improved results. Powered by their unwavering commitment to our customers and carriers and fueled by their growing adoption of the Robinson, operating model and Cutting Edge tools.

With that, I'll turn it over to a rune to provide an update on the Innovation. We're delivering to strengthen our customer and carrier experience and improve. Our gross margin and operating Leverage.

Arun Rajan: Thanks, Michael, and good afternoon, everyone. In Q2, we continue to disrupt from within to transform our business to better serve our customers and to widen our competitive mode. In line with the strategy that we laid out at our 2024 Investor Day, we are scaling several innovations, including our fleet of secure proprietary AI agents across every aspect of the extensive quote-to-cash lifecycle of an order and to more modes and customers. One recently announced example is a new AI agent that helps shippers automate the process of classifying LTL freight under a new national system. In the AI agent's first few months, it has been determining the freight class and code for about 2,000 orders a day, and it has reduced the processing time from 10 minutes or more per shipment to 10 seconds or less.

Thanks, Michael and good afternoon everyone.

In Q2, we continue to disrupt from within to transform our business, to better serve our customers and to widen our competitive mode,

In line with the strategy that we laid out at our 2024 Investor Day, we are scaling several innovations, including our fleet of secure proprietary AI agents across every aspect of the extensive quote-to-cash life cycle of an order and to more modes and customers.

1 recently announced example, is a new AI agent that helps shippers automate. The process of classifying LTL Freight under a new National system.

In the AI agents first, few months it has been determining the freight class and code for about 2,000 orders a day.

Arun Rajan: The AI agent can also handle hundreds of LTL shipments at once and determine the freight classification for all of them simultaneously. Our customers' freight gets on the road faster, and our people can devote more time to the work that our customers value most, helping them manage disruptions and operate their supply chains more strategically. Another way that we continue to disrupt from within is by leveraging and scaling the use of game-changing AI technology, such as Agentic AI, to power new capabilities that are backed by our unmatched data and scale. The advanced reasoning capability of Agentic AI expands the boundaries of what's possible for process automation by adding the ability to autonomously perform complex tasks without the explicit instructions that Gen AI requires.

And it has reduced the processing time from 10 minutes or more per shipment to 10 seconds or less.

The AI agent can also handle hundreds of LTL shipments at once.

And determine the freight classification for all of them simultaneously.

Our customers Freight gets on the road faster and our people can devote more time to the work that our customers value. Most,

Helping them manage disruptions and operate, their supply chains more strategically.

Another way that we continue to disrupt from within is by leveraging and scaling the use of game-changing AI technology, such as agentic AI to power New capabilities that are backed by our unmatched data and scale.

Arun Rajan: As we continue to improve our service with cost-efficient AI task agents that listen, learn, and act all day, every day, Agentic AI has the ability to ignite a revolution and empower systems to think, adapt, and act differently, enabling us to deliver fast, accurate, and personalized service at scale and in any market. All of these innovations are reducing the amount of time it takes for us to respond to a quote or for a tendered load to be accepted, thereby providing a better customer experience. Additionally, our proprietary AI is supporting our market share and margin expansion initiatives. The faster speed provided by our AI has enabled us to respond to more quotes and win more business, thereby augmenting our market share growth.

The advanced reasoning capabilities of agentic AI expands the boundaries of what's possible for process automation by adding the ability to autonomously perform complex tasks, without the explicit instructions that Genai requires.

As we continue to improve our service with cost efficient AI tasks agents, that listen, learn and act all day every day. Agentic AI has the ability to ignite a revolution and Empower systems to think adapt and act differently.

Enabling us to deliver fast accurate and personalized service at scale and in any Market.

All of these Innovations are reducing the amount of time, it takes for us to respond to a quote, or for a tender load to be accepted.

Thereby, providing a better customer experience.

Additionally, our proprietary AI is supporting our market share and margin expansion initiatives.

The fastest speed provided by our AI has enabled us to respond to more quotes. And when more business thereby augmenting, our market share growth

Arun Rajan: The continued advancement of our AI is powering our dynamic pricing and costing, and we are responding more surgically and faster than ever to dynamic market conditions by performing more frequent price discovery. Along with our operating model rigor and our revenue management practices, this is contributing to the gross margin improvement that we're delivering. Through the same rigor, we've also improved our ability to manage the short-term gross margin compression that typically comes with a spot rate inflection, such that we are confident in our ability to shorten the time and reduce the impact of any margin compression compared to historical spot rate inflections. Over a 12-month timeframe, we expect a stronger demand and/or reduction of excess capacity that leads to a spot rate inflection to outweigh any short-term margin compression that may occur. In this regard, we believe our outperformance will continue when spot rates inflect.

The continued advancement of our AI is powering our dynamic pricing and costing, and we are responding more surgically and faster than ever to dynamic market conditions by performing more frequent price discovery.

Along with our operating model rigor and our revenue management practices, this is contributing to the gross margin improvement that we're delivering.

Through the same rigor, we've also improved our ability to manage the short-term, gross margin compression. That typically comes with a spot rate inflection such that we are confident in our ability to shorten the time and reduce the impact of any margin compression compared to historical spot rate inflections.

over the 12-month time frame, we expect a stronger demand and or reduction of excess capacity that leads to a spot rate inflection to outweigh any short-term margin, compression that may occur

in this regard, we believe our outperformance will continue on spot rates in fact,

Arun Rajan: Finally, the growing automation across our quote-to-cash lifecycle, whether it be in quoting, order entry, load tenders, appointment scheduling, or other manual tasks, creates business model scalability. This enables us to decouple headcount growth from volume growth and to create greater operating leverage. Our ability to leverage evolving technology has played a key role in our greater than 35% productivity increase since the end of 2022, and we expect to create further operating leverage as evergreen productivity improvements continue in 2025 and beyond. The advancements that we're bringing to our customer supply chains, such as automation powered by AI, have significant impact due to our scale and our information advantage, which comes from moving more truckload freight than anyone in North America and doing more LTL shipments than any other 3PL. To date, our tech and AI investments have been over-indexed to Nast, where we could get the greatest leverage.

finally, the drawing automation across our quote to Cache life cycle, whether it be in quoting

Order entry low tenders appointment scheduling or other manual tasks.

Creates business models scalability.

This enables us to decouple headcount growth from volume growth and to create greater operating Leverage.

Our ability to leverage evolving technology has played a key role in our greater than 35% productivity increase since the end of 2022.

And we expect to create further, operating leverage as Evergreen productivity improvements continued in 2025 and Beyond.

Automation powered by AI have significant impact due to our scale and our information Advantage which comes from moving more truckload Freight than anyone in North America and doing more LTL shipments than any other 3pl.

Arun Rajan: But we're now putting more emphasis on deploying the same playbook in Global Fording and expect to generate further improvements in that business to enable us to achieve our 30% operating margin target. Ultimately, we are focused on three items that are key to our strategy: transforming the customer and carrier experience to elevate our service offering and drive growth, delivering business model scalability, and driving gross margin and operating margin expansion. Technology continues to evolve, and we have and will continue to disrupt from within to stay at the forefront of that evolution. With that, I'll turn the call over to Damon for a review of our second quarter results.

To date our Tech and AI Investments have been over-indexed and asked where we could get the greatest Leverage.

What we're now putting more emphasis on deploying the same playbook in global forwarding and expect to generate further improvements in that business to enable us to achieve our 30% operating margin Target.

Ultimately, we are focused on three keys to our strategy.

Transforming the customer career experience to elevate our service offering and drive growth.

Delivering business model scalability.

And driving gross margin and operating margin expansion.

Technology continues to evolve and we have and will continue to disrupt from within to stay at the Forefront of that evolution.

Damon Lee: Thanks, Arun, and good afternoon, everyone. As you've heard today, Q2 marked another step forward in executing on the strategic initiatives aimed at our North Star of growing operating income. This was driven by market share growth, ongoing AGP optimization, discipline cost management, and evergreen productivity initiatives. Even as overall market volumes declined, we improved the quality of our volume and AGP through market share gains, discipline capacity procurement, and effective revenue management. Total AGP was up 5.8 million year over year, despite a 15 million decline due to the sale of our European surface transportation business. The overall AGP increase was driven by a 3% increase in Nast and a 1.9% increase in Global Fording. On a monthly basis, compared to Q2 of last year, our total company AGP per business day was down 5% in April, up 5% in May, and up 2% in June.

With that, I'll turn the call over to Damon for a review of our second quarter results.

Thanks Arun and good afternoon, everyone.

As you've heard today, Q2 marked another step forward in executing on the strategic initiatives aimed at our North Star of growing operating income.

This was driven by market share growth.

Ongoing AGP optimization.

Discipline cost management and Evergreen productivity initiatives.

Even as overall Market volumes declined.

We improved the quality of our volume nagp through market, share gains.

Discipline capacity procurement and effective Revenue management.

Total AGP was up 5.8 million year a year, despite a 15 million decline.

Due to the sale of our European surface transportation business.

The overall AGP increase was driven by a 3% increase in NAST.

And at 1.9%, increase in global hoarding.

On a monthly basis compared to Q2 of last year, our total company AGP per business day was down 5% in April.

Up 5% in May.

Damon Lee: From an expense standpoint, our total operating expenses declined 32 million, or 6.3% year over year. Q2 personnel expenses were 335.3 million, including 3.9 million of charges related to workforce reductions. Excluding these charges, our Q2 personnel expenses were 331.4 million, down 20.3 million due to our continued productivity and cost optimization efforts, the divestiture of our European surface transportation business, and a non-reoccurring benefit of approximately 6.3 million from certain actions taken within Q2. Our average headcount was down 11.2% year over year in Q2 and was down 3.7% sequentially, reflecting our dynamic workforce planning process that enables us to quickly adapt to changing market conditions.

And up 2% in June.

From an expense standpoint, our total operating expenses declined by $32 million, or 6.3%, year-over-year.

To Personnel. Expenses were 335.3 million.

Including 3.9 million of charges related to Workforce reductions.

Excluding these charges, our Q2 Personnel expenses were 331.4 million.

Down 20.3 million due to our continued productivity and cost optimization efforts.

The destitute of our European surface transportation business.

And a non-recurring benefit.

Of approximately 6.3 million from certain actions taken within Q2.

our average headcount was down 11.2% year-over-year in Q2 and was down, 3.7% sequentially reflecting, our Dynamic workforce planning process, that enables us to quickly adapt to changing market conditions,

Damon Lee: Based on our strong cost controls and productivity improvements through the first half of the year and the visibility we have into the back half, we are lowering our guidance for 2025 personnel expenses to be in the range of 1.3 to 1.4 billion compared to our prior range of 1.375 to 1.475 billion. This reflects our disciplined approach to managing our cost structure and our ability to drive efficiency while positioning the organization for long-term growth, while remaining committed to further decoupling of headcount from volume. With low to mid-team turnover rates, we are well positioned to manage headcount primarily through natural attrition if needed. Our Q2 SG&A expenses were 142 million, excluding 0.4 million of other charges related to the divestiture of our European surface transportation business. SG&A expenses of 141.6 million were down 0.8 million year over year.

Based on our strong cost controls and productivity improvements through the first half of the year.

And the visibility we have into the back half.

We are lowering our guidance for 2025 Personnel expenses.

To be in the range of 1.3 to 1.4 billion.

Compared to our prior range of 1.375 to 1.475 billion.

This reflects our disciplined approach to managing our cost structure and our ability to drive efficiency while positioning the organization for long-term growth.

While remaining committed to further decoupling of headcount.

From volume.

With low to mid te turnover rates. We are well positioned to manage headcount primarily through natural attrition if needed.

Our Q2 sgna expenses were 142 million.

Excluding 4 million of other charges related to the destitute of our European surface transportation business.

SG&A expenses of $141.6 million were down $0.8 million year-over-year.

Damon Lee: We are also lowering our guidance for 2025 SG&A expenses to be in the range of 550 to 600 million, compared to our prior range of 575 to 625 million. This guidance includes depreciation and amortization of 95 to 105 million. Although most of our SG&A expenses are subject to inflation, we expect continued cost improvements to partially offset the inflationary impact. Shifting back to Q2, our effective tax rate for the quarter was 21.4%. We still expect our 2025 full-year effective tax rate to be in the range of 18 to 20%. We generated 227.1 million in cash from operations in Q2, and our capital expenditures were 20.2 million. We still expect our full-year capital expenditures to be 65 to 75 million.

We are also lowering our guidance for 2025 sgna expenses to be in the range of 550 to 600 million.

Compared to our prior range of 575 to 625 million.

This guidance includes depreciation and amortization of 95 to 105 million.

Although most of our SG&A expenses are subject to inflation.

Impact.

Shifting back to Q2 our effective tax rate for the quarter was 21.4%.

We still expect our 2025 full year effective tax rate to be in the range of 18 to 20%.

We generated 227.1 million in cash from operations in Q2.

And our capital expenditures were $20.2 million.

Damon Lee: From a balance sheet perspective, we ended Q2 with approximately 1.22 billion of liquidity, comprised of 1.07 billion of committed funding under our credit facilities and a cash balance of 156 million. Our net debt to EBITDA leverage at the end of Q2 was 1.40 times, down from 1.54 times at the end of Q1. Our financial strength continues to be a key differentiator in our industry as it enables us to continue investing in the bottom of the freight cycle and improving our capabilities. While our capital allocation strategy remains grounded in maintaining an investment-grade credit rating, our financial strength and improved leverage ratio enabled us to return approximately 161 million of cash to shareholders in Q2 through 85.8 million of share repurchases and 74.9 million of dividends.

We still expect our full year Capital expenditures to be 65 to 75 million.

From a balance sheet perspective, we ended Q2 with approximately $1.22 billion of liquidity, comprised of $1.07 billion of committed funding under our credit facilities and a cash balance of $156 million.

Our net debt to EBA leverage at the end of Q2 was 1.40 times down from 1.54 times at the end of q1.

Our financial strength continues to be a key differentiator in our industry, as it enables us to continue investing in the bottom of the freight cycle and improving our capabilities.

While our Capital allocation strategy remains grounded in maintaining an investment grade credit rating.

Our financial strength and improved leverage ratio enabled us to return approximately 161 million of cash to shareholders in Q2.

Damon Lee: Compared to last year, our improved leverage ratio has led to a higher likelihood of continued share repurchases in the current year. As we continue to build on our momentum, our Q2 financial results further validate the transformation underway at C. H. Robinson. With the disciplined execution driven by a Robinson operating model and the strength of our strategies to outperform in any market environment, I'm confident in our trajectory, and I'm energized by what lies ahead. With that, I'll turn the call back to Dave for his final comments.

Through 85.8 million, a share repurchases, and 74.9 million of dividends.

Compared to last year, our improved leverage ratio has led to a higher likelihood of continued share repurchases in the current year.

As we continue to build on our momentum, our Q2 Financial results further validate the transformation underway at CH Robinson.

With the disciplined execution driven by a Robinson operating model.

And the strength of our strategies to outperform in any Market environment.

I'm confident in our trajectory and I'm energized by what lies ahead.

With that, I'll turn the call back to Dave for his final comments.

Dave Bozeman: Thanks, Damon. As you've gathered from our comments today, we remain focused on executing our self-help initiatives to strengthen our market share, expand our margins, and enhance the level of service we deliver to our customers and carriers. These efforts are central to our strategy to create long-term, sustainable value and to lead the logistics industry forward. I'm proud of the work we have done over the past two years to stand up a new operating model and to get fit, fast, and focused. Our cost structure is in a much better position, with greater than 35% productivity gains delivered since 2022, and we're continuing to drive further process improvements to enhance our service and increase our overall operating leverage. As lean tools are deployed more broadly across our organization, our teams are becoming more increasingly equipped to identify root causes of problems, implement countermeasures, and drive meaningful improvements.

Thanks, Damon.

As you've gathered from our comments today, we remain focused on executing our self-help initiatives to strengthen our market share. Expand our margins, and enhance the level of service, we deliver to our customers and carriers,

These efforts are central to our strategy to create long-term sustainable value and to lead the logistics industry forward.

I'm proud of the work we have done over the past 2 years to stand up a new operating model and to Get Fit Fast and focused.

Our cost structure is in a much better position with greater than 35% productivity gains delivered since 2022. And we're continuing to drive further process improvements to enhance our service and increase our overall operating Leverage

As lean tools are deployed more, broadly across our organization.

Our teams are becoming more increasingly equipped to identify root causes of problems.

Dave Bozeman: That's how we've consistently delivered outperformance for six consecutive quarters and how we'll continue to do so regardless of market conditions or cycle. This outperformance does not happen because you are one of the pack. This is a new and different Robinson, and our difference sets us further and further apart from the pack. Our transformation is structural and technological. We're redefining what it means to be a logistics company, leading from the front with cutting-edge technology, leveraged by the best logisticians in the game, and moving faster than ever to shape the future of the supply chain. And as we lead our industry and stay on offense with our AI strategy, we are excited about the future.

Implement counter measures and drive meaningful improvements.

That's how we've consistently delivered outperformance for six consecutive quarters, and how we'll continue to do so. So, regardless of market conditions or cycles, this outperformance does not happen because you are one of the pack.

This is a new and different Robinson.

and our difference sets up further and further apart from the pack,

Our transformation is structural and technological.

We're redefining what it means to be a logistics company.

Leading from the front with Cutting Edge, technology, leveraged by the best logisticians in the game and moving faster than ever to shape the future of the supply chain.

Dave Bozeman: Our advanced AI and machine learning technology is improving our gross margins by allowing us to better align capacity and pricing to the specific needs of our customers and to specific market conditions. These superior dynamic costing and pricing capabilities will be even more important when we eventually see a turn in overall freight demand. Our technology is lifting mundane, repetitive tasks off our people's plates, freeing them up to do more strategic work and to reach more customers, garner more wallet share, and move up the value stack by leveraging our growing capabilities. I want to thank our people for their relentless efforts to provide exceptional service to our customers and carriers, for embracing the Robinson operating model and continuing to execute with discipline.

And as we lead our industry and stay on offense with our AI strategy, we are excited about the future.

Our advanced AI and machine learning technology is improving our gross margins by allowing us to better align capacity and pricing to the specific needs of our customers and to specific market conditions.

These Superior Dynamic costing and pricing capabilities will be even more important when we eventually see a turn in overall, Freight demand.

Our technology.

Is lifting mundane repetitive tasks.

Off our people's plates.

Freeing them up to do more strategic work and to reach more customers.

Stack by leveraging our growing capabilities.

I want to thank our people for their Relentless efforts to provide exceptional service to our customers and carriers.

Dave Bozeman: I'm confident in the team's ability to drive a higher and more consistent level of operational execution and to keep pushing the bar higher on our financial performance across market cycles. As I reflect on my first two years leading this great company, I'm proud of how we're building on a 120-year legacy of grit, innovation, and a relentless focus on the customer. From the beginning, Robinson has been grounded in delivering a great customer experience, and that foundation remains core to how we will grow and lead in the future. But we also had hard work to do to evolve, to push our mindset to deliver more value, sharpen our execution, solve problems quickly, and differentiate through speed, simplicity, and clarity.

For embracing the Robinson operating model and continuing to execute with discipline.

I'm confident in the team's ability to drive a higher and more consistent level of operational, execution, and a key, pushing the bar higher on our financial performance across markets cycle,

As I reflect on my first 2 years, leading this great company.

I'm proud of how we're building on a 120 Year. Legacy of grit Innovation and a Relentless focus on the customer.

From the beginning Robinson has been grounded in, delivering a great customer experience. And that Foundation remains core to how we will grow and lead in the future.

But we also have hard work to do to evolve.

Dave Bozeman: We've made great progress on our transformation journey, and we're seeing the results, not just in stronger earnings, but in how we improve execution, innovate fast, and elevate the customer and carrier experience. We've reinvigorated a winning culture, and we're getting our swagger back, but we're not resting on our laurels. We will continue to disrupt ourselves and this industry to lead with purpose, move with urgency, and build a company that future generations will be just as proud to inherit. The message is clear: C. H. Robinson is not just transforming; we're leading. We are the new disruptor, and we're on track to drive sustainable outperformance across market cycles. That concludes our prepared remarks. I'll turn it back to Paul now for the Q&A portion of the call.

To push our mindset to deliver more value, sharpen our execution, solve problems quickly, and differentiate through speed, simplicity, and clarity.

We've made great progress on our transformation journey and we're seeing the results.

Not just in stronger earnings, but in how we improve execution and innovate fast.

And Elevate the customer and carry experience.

We've reinvigorated a winning culture.

And we're getting our Swagger back.

But we're not resting on our laurels.

We will continue to disrupt ourselves and this industry to lead with purpose.

Move with urgency and build a company that future Generations will be just as proud to inherit.

The message is clear. CH Robinson is not just transforming. We're leading.

We are the new disruptor, and we're on track to drive sustainable outperformance across market cycles.

That concludes our prepared remarks. I'll turn it back to Paul. Now, for the Q&A portion of the call,

Paul (Operator): Thank you. We'll now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull up our questions. Thank you. Our first question is from Chris Weatherby with Wells Fargo.

Thank you. We'll now be conducting any question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 to remove your question from the queue.

For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.

1 moment, please, while we pull up for questions.

Thank you. Our first question is from Chris Weatherbee with Wells Fargo.

Michael Castagnetto: Yeah. Hey, thanks. Good afternoon, guys. you know, Dave, I'm sitting here looking at the operating margins of Nast at 38%, you know, improving, as you noted, kind of getting you towards your mid-cycle goals at what appears to be sort of the bottom of the market. So I guess as you start to think about what's possible with the business, you know, I don't know if you've rethought what you think the potential opportunity is on the margin side. It just seems like productivity is moving faster than we had maybe expected. So just would hope if you could expand a little bit upon what you think the potential of Nast margins and just overall margins for the business could be over time.

Yeah. Hey thanks. Good afternoon, guys.

um,

Dave Bozeman: Hey, Chris. good to hear from you. Hey, listen, no, you're you're right. First of all, we feel really good about our productivity. I mean, it's been in two and a half years at at 35% on where we're going, and, we we look at that as, evergreen productivity. It's part of our our operating model. It, it doesn't surprise us as far as, how we're moving up, the stack on our productivity. And where we really feel good about is as we continue our journey, we're we're jumping into our technology, which will only enhance, you know, our productivity as we go forward. Now, we're not discounting the macros. It's it's still a tough environment out there, but, you know, the way we look at it is, you know, it's a higher high and higher low, and we're going to continue to, to drive that productivity.

you know, Dave, I'm sitting here looking at the operating margins of Nast at 38%. Um, you know, improving as you noted kind of getting you towards your mid-cycle goals at what appears to be sort of the bottom of the market. So I guess as you start to think about what's possible with the business, you know, I don't know if you've rethought what you think the the potential opportunity is on the margin side. It just seems like productivity is moving faster than we had maybe expected. So this would help you if you could expand a little bit upon what you think, the potential of Nas margins and just overall margins for the business could be over time

Hey Chris uh good to hear from you. Hey listen. Know you're you're right. First of all we feel really good about our productivity. I mean it's been and 2 and a half years at at 35% on where we're going and uh we we look at that as um Evergreen productivity. It's part of our our operating model. It um it doesn't surprise us as far as um how we're moving up. Uh the stack on our productivity.

Dave Bozeman: I'll have Michael, maybe expand a little bit more, just on on Nast's, overall margins where we are, in the cycle. But, as I say, we we feel really good about about where we are and kind of what we what we talked about at Investor Day as well, which is why we kind of gave that range, of, of the 350 to 450 overall. But, Michael, you you can expand.

Michael Castagnetto: Yeah. Hey, Chris. again, thanks for the question. I think Dave hit it. First and foremost, I'd say we believe our productivity gains and the movement we've made in our margins are evergreen, and we expect, to continue to challenge ourselves through the operating model to find additional productivity, next week, next month, next quarter, you you name it. I'll go back to some of the comments Arun made. You know, we do think there's some additional unlock in in the world of Agentic AI. we've been industry-leading in maybe the first generation of AI and applying that to our business, but we think there's another round of unlocks that we're just in the early innings on and just starting to get our arms around.

And what what we really feel good about is as we continue our journey. Uh, we're we're jumping into our technology, uh, which will only enhance, you know, our productivity as we go forward. Now we're not discounting the macros, it's it's still a tough environment out there but um, you know, the the way we look at it is, you know, it's a higher high and higher low. Um and we're going to continue to um to drive that productivity. I have Michael uh, maybe expand a little bit more uh, just on on NAS, uh, overall margins where we are, uh, in the cycle. But uh, as I said we we feel really good about about where we are and kind of what we, what we talked about at investor day as well. Which is why we kind of gave that range um of uh, of the 350 to 450 overall. But you can expand. Yeah. Hey Chris. Uh, again, thanks for the question. I think Dave, Hit it. First and foremost, I'd say, we believe our productivity gains in the movement we've made in our margins are Evergreen and

Michael Castagnetto: And so we feel really good, one, really proud of the team's performance in a continued difficult environment, but two, do believe there's some opportunity for us, whether the market changes or not, right? We believe we can continue to get better at what we're doing, and and really excited about the work our teams are doing together, Arun's team and and and our team in Nast, just really, a lot of great stuff in front of us. Appreciate it. Thanks, guys.

Productivity. Uh, next week. Next month. Next quarter. You you name it. Um, I'll go back to some of the comments of Rune made, you know, we do think there's some additional unlock in in the world of agentic AI. Um, we've been industry-leading in maybe the first generation of AI and applying that to our business. But we think there's another round of unlocks that were just in the early Innings on and just starting to get our arms around. And so we feel really good 1 really proud of the team's performance in a continued difficult environment, uh, but 2, uh, do believe there's some opportunity for us, uh, whether the market changes or not, right. We believe we can continue to get better at what we're doing. Um, and, and really excited about the work, our teams are doing together, a runes team and and and our team in NASA just really, uh, a lot of great stuff in front of us.

Appreciate it. Thanks guys.

Paul (Operator): Thank you. Our next question is from Rita Harnang with Deutsche Bank.

Thank you. Our next question.

Mr. Rita, our name with Deutsche Bank.

Rita Harnang: Hey, everyone. thanks for the time and very impressive results here. Echo Chris's sentiments, you know, at the bottom of the cycle, kind of getting these types of margins is is quite impressive. So maybe you can talk about, you know, there remains this gnawing skepticism about the ability for C. H. Robinson to replicate or augment on such success in the event of an upcycle. I know, you know, you've talked about this ad nauseum in the past, but maybe you can update our views and share, you know, as we've seen volume growth this quarter, you know, margins still expanded a very strong amount. So maybe this speaks to is another example of how, you'll continue to sort of rebut that. But, yeah, just all the thoughts you can share, around that would be helpful.

Hey everyone. Um, thanks for the time and very impressive results here, Echo, Chris's sentiments. You know, at the bottom of the cycle, of kind of getting these types of margins is is quite impressive. So maybe you can talk about, you know, the remains of non-s skepticism about the ability for CH Robinson to replicate or augments on such success in the event of an upcycled. Um, I know, you know, you've talked about this at

Nauseam in the past. So maybe you can update our views and share, you know, as we've seen volume growth, this quarter, you know, margins still expanded a very strong amount. So maybe this speaks to is another example of how um you'll continue to sort of rebut that. But yeah, this all the thoughts you can share um around that would be helpful.

Dave Bozeman: Yeah. Hi, Rita. Good to good to hear from you. this is Dave. The, you know, we we look at this, and we've been saying, as you as you pointed out, one, we feel we feel fundamentally really good about, one, where we are, in this cycle. But I will tell you, we feel even better that when when the market, snaps back, that, we'll be in pole position to, to continue to drive, what you're seeing. And, and, that'll be energized even more, based on our operating model and and the technology, that Michael just, just spoke about and that Arun spoke about as well. The key thing that we've always talked about, and we said it before, is we are fundamentally a different company, structurally.

Yeah, hi Luca. Good to hear from you. This is Dave, the um,

You know, we we look at this and we've been saying as you as you pointed out um 1 we feel, we feel fundamentally, really good about 1 where we are um in this cycle.

But I will tell you we feel even better that when when the market um, snaps back that will be in pole position to, um, to continue to drive, uh, what you're seeing and and uh, that'll be energized even more, um, based on our operating model and and the technology uh, that Michael just uh, just spoke about and that a room spoke about as well.

Dave Bozeman: Where we were, yesterday, being 2018 to where we are now, structurally, we've put that in place in how we operate, the discipline we operate with, and the execution, that we go after with an evergreen continuous improvement, approach. and so so when the market goes back, you know, we we think that we'll be in a really good position. I'll call out that, we've we've always pointed to, our Global Fording business as as that kind of canary in the coal mine. last year, we saw Global Fording grow each quarter, while taking down expenses. this business goes through our same operating model, and didn't have the benefit of the technology, improvements that we put in Nast. So it kind of gives you, a headline within that business of of what's to come when we start really driving a market rebound, within Nast.

The key thing that we've always talked about, and we've said it before, is we are fundamentally a different company, uh, structurally, where we were, uh, yesterday being 2018 to where we are now. Um, structurally, we put that in place and how we operate, the discipline we operate with, um, and the execution, uh, that we go after with an evergreen continuous improvement approach.

Dave Bozeman: So we feel like we're we're positioned, extremely well for, for the rebound. Damon, you want to expand on that?

Damon Lee: Yeah. Thanks, Dave. Rita, I would just say that, the way we always answer that question is the the processes that we have driven efficiency to, that we've brought technology to, they're fundamentally different, right? They're they're completely changed. And so, therefore, there's no need to have the same level of human touch on those processes when the market enters a new stage of of recovery, right? And so for us, it's not even a question of do you add back headcount to support the volume. There's just no need to add that headcount back, right? The processes are fundamentally changed. so I'd say that is is point number one. Point number two is, is as as we've talked about many times, I mean, our our operating model doesn't let us plateau. It doesn't let us get stale on productivity. It drives continuous improvement, consistently.

And so, so when the market goes back, um, you know, we we think that we'll be in a really good position, I'll call out that uh, We've we've always point to our Global forwarding business as as that kind of canary in a coal mine. Um, last year we saw Global forwarding grow each quarter. Uh, while taking down expenses, um, this business goes through our same operating model uh and didn't have the benefit of the technology uh improvements that we put in that. So it kind of gives you a headline within that business of of what's to come. When we start really driving a market rebound uh within that. So we feel like we're, we're positioned uh, extremely well for um for the rebound. Uh Damon. You want to expand on that? Yeah, thank thanks Dave Richie, I would just say that.

Um, the way we always answer that question is the processes that we have driven efficiency to, that we've brought technology to. They are fundamentally different, right? They're completely changed.

And so therefore that there's no need to have the same level of human touch.

On those processes when the market enters a new stage of recovery, right? And so for us, it's not even a question of do you add back headcount to support the volume? There's just no need to add that headcount back, right? The processes are fundamentally changed. So I'd say that is point number one. Point number two is, is is...

Damon Lee: And that's no different in the decoupling of our our headcount, right? If you think about what's what's fundamental to our productivity, it is driving efficiency in our processes. It's using technology, to replace those human human touches. and our operating model makes sure that's a continuous, flow of improvement. So, you know, I think we've been pretty consistent on our answer. You know, we we fundamentally believe, you know, the processes that we've automated are they're different and therefore don't require the same level of of human interaction that they did yesterday. And therefore, we're highly confident when the market does recover that we'll see great operating leverage as part of that recovery.

Operating model. Make sure that's a continuous uh flow of improvement. So you know I think we've been pretty consistent on our answer, you know? We we fundamentally believe you know, the processes that we've automated are they're different and therefore don't require the same level of of human interaction that they did yesterday and therefore we're highly confident when the market does.

Recover that we'll see, great operating leverage as part of that recovery.

Paul (Operator): Thank you. Our next question is from Ariel Rosa with Citi Group.

Thank you. Our next question is from Ariel Rosa with City.

Michael Castagnetto: Hi. This is Ben Moore of Citi on for Ariel Rosa. Thanks for taking our question and congrats on a great quarter. as the biggest freight broker, you see everything across your industry and wanted to get your take on trucker capacity related to, freight broker technology. As you know, trucker capacity has been, extremely elevated. It's remained elevated for three years as FMCSA carrier registrations this June are still at COVID highs from 2022, and net adds are even above exits in Q2. And this is happening even as truckers should deplete their COVID savings and transport loan impairments are on the rise. There's this growing narrative that broker technology is enabling owner-operator carriers to stay around longer, and that may be the key behind the overcapacity issue that's been pressuring rates.

Hi. This is Ben Moore of City on for Ari. Rosa thanks for taking my question and congrats on a great quarter. Um as the biggest freight broker you see everything across your industry and wanted to get your take on trucker capacity related to uh freight broker technology. As you know, trucker capacity has been uh extremely elevated. It's remained elevated for 3 years as FMCSA carrier registration's this June are still at coid highs from 2022. And net ads are even above exits in 2 q and this is happening even as truckers should delete their Co savings and transports loan. Impairments are on the rise, there's this growing narrative that broker Technologies, enabling owner operator carrier to stay around longer and that may be a key behind the over capacity issue that's been

Michael Castagnetto: And this is broker tech, not just you and your largest competitors, but the 25,000 smaller brokers enabling small owner-operator carriers to find loads to better match their costs, like how Uber, the Uber apps, driven a proliferation of gig drivers to overtake large taxi medallion companies. What are you seeing in terms of broker tech of smaller brokers that you come up against? And do you believe this might be a key behind the overcapacity issue pressuring rates, that keeps persisting?

Pressuring rates and this is broker Tech, not just you and your largest competitors, but the 25,000 smaller Brokers enabling small owner operator carriers to find loads to better match their costs. Like, how Uber, uh, the Uber apps, uh, driven a proliferation of gig drivers to overtake, large taxi, Medallion companies. What are you seeing in terms of broker Tech of smaller broker that you come up against? And do you believe this might be a key behind the over capacity issue, pressuring rates uh, that keeps persisting.

Michael Castagnetto: Hey, Bruce. this is Michael. thanks for the question. you know, I think, one, certainly, there's been a democratization of of kind of freight brokerage tech over the last couple of years, and and and there are plenty of folks offering capabilities out to smaller brokers. but there's a couple of things that I would say we we believe pretty strongly. And one, our data and information advantage and scale, continues to drive opportunities for us in that space. from your question on, you know, is it enabling carriers to stay in longer, I I wouldn't say, that's the case. We've seen a decline not only in the number of brokers but also in in capacity exits. And as we said in our prepared comments, we are seeing a bit better balance in the marketplace.

Hey Bruce, uh, this is Michael, uh, thanks for the question. Um,

Michael Castagnetto: but but really, I I think our ability to match the right freight to our carriers is unmatched in the industry. And our ability to match our customer supply chain needs with that ability to match with carriers is what's driving our success, right? We believe, that there is a clear differentiation between what we do in the marketplace and our competition, whether that competition are assets, large brokers, or small brokers. And and so, I'm not sure I would agree maybe with your sentiment on on on that being a driver of keeping capacity in the marketplace. but certainly, I would acknowledge the democratization of of freight brokerage tech. but we believe our tech stack combined with our people is a clear differentiator for us in the marketplace.

You know, I think 1 C there's been a democratization of of kind of freight, brokerage Tech over the last couple years and and and there are plenty of folks offering capabilities out to smaller Brokers. Um, but there's a couple things that I would say, we we believe pretty strongly and 1 our data and information advantage and scale uh, continues to drive opportunities for us in that space. Um, from your question on, you know, is it enabling carriers to stay in longer? I, I wouldn't say, um, that's the case. We've seen a decline, not only in the number of Brokers, but also in in capacity exits, and as we said in our prepared comments, we are seeing a bit better balance in the marketplace. Um, but but really, I think

Dave Bozeman: Yeah. Ariel, just to add on to that, the we we have seen, a burndown, as you probably have as well, with brokers as well, about 18% plus now, over the last, you know, year and a half, two years. So there's a there's a burndown of, of of brokers. And as Michael said, on the carrier side, we see some of that as well. So, it's it's interesting. We stay focused on on what we're doing, but, it's a tough market out there for a a number of, individuals, both carriers and and and brokers.

Our ability to match the right Freight to our carriers is UN unmatched in the industry and our ability to match our customer supply chain needs with that ability to match with carriers. Is what's driving our success, right? We believe, uh, that there's a clear differentiation between what we do in the marketplace and our competition, whether you that competition are assets, large Brokers, or small Brokers and, and so, um, I'm not sure I would agree, maybe with your sentiment on, on, on that being a driver of keeping capacity in the marketplace. Um, but certainly I would acknowledge the democratization of of freight brokerage Tech. Um, but we believe our Tech stack combined with our people is a clear differentiator for us in the marketplace.

Yeah, Ari. I just to add on to that the um,

We we have seen uh, a burndown as you probably have, as well, uh, with Brokers as well about 18% plus now, uh, over the last, um, you know, year and a half 2 years. So, there's a, there's a burndown of uh, of of Brokers. And as Michael said on the carrier side, we see some of that as well. So um it's it's interesting, we stay focused on on what we're doing, but uh it's a tough Market out there for a number of uh individuals both carers and and and brokers.

Michael Castagnetto: Great. Thanks so much.

Great. Thanks so much.

Paul (Operator): Thank you. Our next question is from Scott Roop with Wolf Research.

Thank you. Our next question is from Scott group with Wolfe research.

Scott Group: Hey, thanks. Afternoon. I was wondering if there's any color you can give us on Nast and and forwarding trends and to start Q3 or or or any way you had to think about just normal seasonality, if there's such a thing for for Q3. And then maybe just separately on the on the headcount piece, just do we contemplate, should we contemplate some additional reductions in in the back half of the year? And at what point do we just sort of reach a natural sort of limit in terms of where how much more there is to go here? Thank you.

Hey, thanks. Good afternoon. I was wondering if there's any color you can give us on Nest and forwarding trends.

Count piece. Um, just do we contemplate should we contemplate some additional reductions in in the back half of the year and and at what point do we just sort of reach a natural sort of limit in terms of where,

how much more there is to go here?

Thank you.

Michael Castagnetto: Hey, Scott. This is Michael. Thanks for the question. I'll speak from a Nast perspective first. you know, Q3 historically is sequentially pretty flat to Q2. And so that's just what I'd say from kind of an industry standard and even our historical numbers. you know, from a productivity perspective, or headcount perspective, what I'd say is is is we're going to keep holding ourselves to the challenge that that Damon, Dave, and Arun have mentioned, which is, we're going to get more productive every day, every week, every month. now, some of that comes in direct headcount changes. Some of it comes in how we handle the quote-to-cash lifecycle. there's tons of opportunities for us to improve the way we run and operate our business. but I don't believe I would buy maybe the idea that there's a limit. I think there's a ton of unknown.

Hey Scott, this is Michael. Thanks for the question. I'll speak from a Nas perspective first. Um, you know, Q3 historically is sequentially pretty flat to Q2, and so that's just what I would say. From kind of an industry standard and even our historical numbers, um,

You know, from a productivity perspective, um, or headcount perspective, what I'd say is is is we're going to keep holding ourselves to the challenge that that Damon Dave and Arun have mentioned, which is um we're going to get more productive every day. Every week, every month. Um, now some of that comes in direct headcount changes, some of it comes in how we handle a quote to cash life cycle. Um, there's tons of opportunities for us to improve the way we run and operate our business, um, but I don't believe

Michael Castagnetto: The world of AI and now Agentic AI is going to create, opportunities for us to again shift the way we manage business and create value for our customers and for our people. And and so I would I would not, you know, buy into the idea that we're going to run into a a hard floor, in that aspect. and so that's where I'd answer from a Nast productivity. And I'll hand it over to Damon from the GF side.

I would buy maybe the idea that there's a limit. I think there's a ton of unknown, the world of AI and now ajik ai is going to create, uh, opportunities for us to again shift the way we manage business and create value for our customers and for our people. And and so I would, I would not, you know, buy into the idea that we're going to run into a, a hard floor. Um, and that aspect.

Damon Lee: Yeah. And, and Scott, I'll just kind of end my thoughts on productivity, then I'll give you some market commentary on on forwarding. yeah, I agree with everything Michael said. I'd say the way I would think about our productivity is, as I mentioned before in in previous comments, right, it's an evergreen approach, right? We expect productivity every month, every quarter, every year, right? That's a baseline expectation. In addition to that, there are going to be milestones where technology evolves or processes evolve, and we'll get productivity even on top of that evergreen productivity that's driven by our operating model. So, as Michael said, we really don't see any any future of a plateau in productivity for for us, right? Our operating model is going to drive us to incremental evergreen productivity. The evolution of our technology is going to drive us to that step function productivity.

Um, and so that's where I'd answer from a Nas productive and I'll hand it over to Damon from the GF side. Yeah. And and Scott, I'll just kind of in my thoughts on productivity. Then I'll give you some Market commentary on on forwarding. Um, yeah, agree with everything. Michael said, I say the way I would think about our productivity is as I mentioned before in in previous comments, right? It's an evergreen approach, right? We expect productivity every month, every quarter, every year, right? That's a baseline expectation. In addition to that, there are going to be Milestones where technology evolves or processes evolves and we'll get productivity. Even on top of that Evergreen productivity, that's driven by our operating model. So as Michael said, we, we really don't see any

Damon Lee: So, as Dave has mentioned, we mentioned often, we're in the early innings of our transformation, and that early innings applies to the productivity journey we're on as well. Specifically to to Q3 for Global Fording, as you know, we don't we don't give guidance. But what I will tell you is, and I'll start by framing Q2 and then and then work into Q3. Certainly, for Q2, you know, April was the bottom of our of our volume, you know, due to the the tariff wars and the level of tariffs in in the quarter that we started out with. we did see volume rebound in May and June, but it wasn't a significant rebound, certainly not enough to offset the pressure that we saw in we saw in April. so as you go into Q3, I think there's just still a lot of uncertainty.

Any future of a plateau and productivity for for us, right? Our operating model is going to drive us to incremental Evergreen productivity. The evolution of our technology is going to drive us to that step function productivity. So, as Dave has mentioned, we've mentioned often, uh, we're in the early Innings of our transformation and that early Innings applies to the productivity Journey, we're on as well.

Specifically to, to Q3 for Global 40. And as you know, we don't we don't give guidance. But what I will tell you is and I'll start by Framing Q2 and then and then work into Q3 certainly for Q2, you know. April was the bottom of our of our volume, you know, due to the the Tariff Wars and the level of tariffs in in the quarter that we started out with. Uh we did see volume Rebound in May and June but it wasn't a sign.

Damon Lee: as you see every day in the headlines, right, there's still many trade negotiations still pending. The levels of tariff outcomes related to those negotiations are still pending. so I think the tariff front creates a lot of uncertainty for Q3, and I'd say even the second half of the year. And then I think the unknown on top of that from a macro perspective is, you know, what will consumer confidence be and what will that ultimately, you know, derive from a GDP perspective? So I think that's the equation I think we've all got to balance for the second half is, you know, what pressure are tariffs going to create from an overall demand perspective? And can that be offset, by consumer confidence and GDP growth, right?

Ific rebound. Certainly not enough to offset the pressure that we saw in. We saw on April. Um, so as you go into Q3, I think there's just still a lot of uncertainty. Um, as you see every day in the headlines, right? There's still many trade negotiations, still pending the levels of tariff outcomes related to those. Negotiations are still pending, um, so I think the Tariff front creates a lot of uncertainty for Q3 and I'd say even the second half of the year. And then, I think the unknown on top of that, from a macro perspective is,

Damon Lee: I think that's that's the equation we're all starting to, starting to run through our models for, for the second half of the year.

You know, what will consumer confidence be and what will that ultimately you know, derive from a GDP perspective. So I think that's the equation. I think we've all got a balance for the second half is, you know what pressure or tariffs going to create from an overall demand perspective and can that be offset um by consumer cons confidence in GDP growth, right. I think that's that's the equation we're all starting to uh

Starting to run through our models for uh, for the second half of the year.

Paul (Operator): Thank you. Thank you. Our next question is from Tom Wadowicz with UBS.

Thank you.

Thank you. Our next question is from Tom Wits with UBS.

Michael Castagnetto: yeah. Good afternoon, and, congratulations on the strong results, against a tough, tough freight backdrop. I apologize if you already commented on this. There were some overlapping calls. But how do you think about the, you know, operating margin, I guess, you know, in Nast, the kind of target of 40% or mid, I don't know, mid-cycle target, however you frame it exactly? You know, you're getting you're getting pretty close and and nice improvement towards that. Is that something that's kind of around the corner, or how do you think about, I guess, the ability to achieve that in a week? You know, what remains a so-called a soft freight market, however you want to frame it. And then on the gross margin for Nast, some further improvement, is there a ceiling on that, or is that how do you think about what that can get to?

Uh, yeah, good afternoon, and uh, congratulations on the strong results against the tough, tough backdrop.

Michael Castagnetto: There's just been a really, you know, favorable, progression in the gross margin in Nast as well. Thank you.

What that can get to. There's just been a really, you know, favorable uh progression in the gross, margin in Nest as well. Thank you.

Michael Castagnetto: Hey, Tom. thank you. This is Michael. I'll take the gross margin side, and then I'll let Damon speak a bit to the, the operating margin side. You know, we've we've been pretty consistent over the last couple of quarters around how we view gross margin volume, the optionality we have to to really maximize the combination of that regardless of market. I think what we're getting better is adding intentionality to our optionality, right? So we know what freight is the right freight for our customers, for our carriers. We know there's some key areas we've talked about, our value equations, whether it's verticals for specific customers or capabilities like short haul or drop trailer or other places.

Michael Castagnetto: And so I think every just as we've been talking, productivity is evergreen, so is our expectation of the improvement of our pricing models, our cost of hire models, our team's interaction with those models and how they're getting better at identifying the right freight, for us to go pursue. And I also do think that customers are, you know, Dave mentioned in his comments, there's a flight to quality, and I think customers are identifying the value we're bringing in the marketplace. And so I don't necessarily know if I'd say, again, I don't like using the word limit anywhere, but I think there is an opportunity for us to continue to refine the combination of volume and margin that we're producing to to keep driving growth for the business and value for our customers.

Hey, Tom uh thank you. This is Michael. Uh I'll take the gross margin side and then I'll let Damon speak a bit to the, uh, the operating margin side. You know, we've we've been pretty consistent over the last couple quarters around how we view gross margin volume, the optionality. We have to to Really maximize the combination of that, regardless of Market. Um I think what we're getting better is adding intentionality to our optionality, right? So we know what Freight is the right Freight for our customers. For our carriers. We know there's some key areas, we've talked about our value equations, whether it's verticals for specific customers or capabilities like shortall or drop trailer or other places. And so I think every just as we've been talking productivity is Evergreen. So is our expectation of the Improvement of our pricing models, our cost of higher models, um our teams interaction with those models and how they're getting better at identifying the right Freight uh, for us to go pursue. And I also do think that customers are

Um, you know, Dave mentioned in his comments, there's a flight to Quality and I think customers are identifying the value. We're bringing in the marketplace. And so, I don't necessarily know if I'd say again, I don't like using the word limit anywhere, um, but I think there is a an opportunity for us to continue to refine the combination of volume and margin that we're producing.

To to keep driving growth for the business and value for our customers.

Dave Bozeman: Yeah, Tom, I'm going to hand it to Damon as well. I just I do want to highlight, the the fact that the team is doing a really exceptional job in a in a super tough market. I mean, this is, you know, we're saying all of this, and I think you all agree that, you know, we're well over three years here and with with, you know, with that pressure, that's on there. But how we're operating in that discipline that the team is operating with is just something that's fundamentally different. And we we do like to to look at that and say that there's a separation there. I mean, how we're how we're operating, how we go about it, how we're trying to separate ourselves out, from competition, I I give the team a lot of credit for that.

Yeah, Tom. I'm going to send it to Damon as well. I just want to highlight, um,

The the fact that the team is doing a really exceptional job in a, in a super tough Market. I mean, this is, you know, we're seeing all of this. And I think you all agree that, you know, we're well over 3 years here and would, would, you know what that pressure? Uh, that's on there. But

Dave Bozeman: And it's a lot of hard work in in really a a tough environment. So, we again, we don't discount it. we just get up every day and and and go do it. But I I just didn't want to discount the fact that, it's a it's a tough market out there, but this team is kind of, you know, innovating through that. And it's just a different way of how we're thinking about it and and executing. But, Damon, you can add a little bit of.

Michael Castagnetto: Yeah. So, Tom, I would just round this out with saying, look, we we feel really good about the margins we delivered in Q2, what we delivered in the first half of of '25. As we've said, you know, every time we get an opportunity, we feel really good about our Investor Day commitments for 2026. now, with that said, right, we won't slow the momentum, right? So there's there's there is no cap on what we think we can do. but we are confident in what we've what we've committed to. I think Michael touched on this on the gross margin level. I'll touch on it on the operating margin level is we've got a lot of optionality between volume and profitability, right? And so we don't want to back ourselves into a corner on on limiting that optionality, right?

How we're operating in that discipline that the team is operating with it's just something that's fundamentally different and we we do like to to look at that and say that there's a separation there. I mean, how we're how we're operating, how we go about it, how we're trying to separate ourselves out uh, from competition. Uh, I I give the team a lot of credit for that and it's a lot of hard work and and really uh, uh, tough environment. So, um, we again, we don't discount it. Uh, we just get up every day and and, and go do it. But I, I just didn't want to Discount. The fact that, uh, it's, it's a tough Market out there. Uh, but this team is kind of, you know, innovating through that and it's just a different way of how we're thinking about it and and executing but Damon, you can add a little bit of. Yeah, so it's something I would just round this out with saying look we we feel really good about the margins. We delivered in Q2 what we've delivered in the first half of of 25 as we've said you know every time we get an opportunity we feel really good about our investor day commitment.

Michael Castagnetto: So every every day, every month, every every every hour in some cases, we're we're playing the the optimization game between market share growth and and margin optimization through growth and and operating. and we feel good about that optionality. So I'll just reiterate, we feel really good about the 40% for Nast at mid-cycle. you know, we certainly won't use that as a cap. And, if performance allows us to exceed that, we will. But we also don't want to give up the optionality we have between market share outgrowth and and profitability.

It's for 2026. Um, now with that said, right? We won't slow the momentum, right? So there's there's there is no cap on what we think we can do. Um, but we are confident in what we've, what we've committed to, I think Michael touched on this, on the gross margin level, I'll touch on it, on the operating margin level is we've got a lot of optionality between volume and profitability, right? And so, we don't want to back ourselves into a corner on on limiting that optionality, right? So every every day, every month, every every, uh, every hour in some cases, we're we're playing the, the optimization game between market share growth, and, and margin optimization through gross, and and operating, um, and we feel good about that optionality. So I'll just reiterate, we feel really good about the 40% for nest at mid cycle.

Um you know we certainly won't use that as a cap and uh performance allows us to exceed that we well but we also don't want to give up the optionality. We have between market share outgrowth and and profitability.

Paul (Operator): Okay. Great. Thank you.

Michael Castagnetto: Thank you.

Okay, great. Thank you.

Thank you.

Paul (Operator): Our next question is from Bruce Chan with Stifel.

Our next question is from Bruce Chan with stifel

Scott Group: Hey, good afternoon, everyone. been a long day, so happy to see these results. Appreciate that. and I think the success that you've had this quarter kind of has me, you know, maybe dreaming about some longer-term possibilities. So, you know, maybe on that front, and thinking about M&A, you know, it's been a little while since you've added to the portfolio. you know, you've made some good progress, you know, over the past few quarters with optimizing the the current business. but we've also had, you know, a lot of changes to trade patterns and and shipper needs. So maybe just talk about the appetite here for inorganic growth and, you know, any places in the portfolio or geographic pockets or lanes, especially in Global Fording, that you might see some opportunities, especially in, you know, what I'd call, buyer's market.Here.

Opportunities especially in, you know what I'd call buyers Market here.

Damon Lee: Yeah, thanks for the question, Bruce. You know what I would say, and I think it served us well, certainly in my 12 months with the company, right, is we have a very disciplined capital allocation model. And as you can see from our results, the organic opportunities we have internal certainly are attractive, right, and certainly get top billing from an investment perspective. So I'll just recap our allocation strategy, and I'll touch on M&A as I go through that. So certainly maintaining our investment grade balance sheet is a top priority. You know, maintaining and growing our dividends is a top priority. As I mentioned just now, you know, Arun and team have a very deep deck of opportunities. That's why we keep talking about early innings, because the organic pipeline of opportunities is very deep, and they're very high ROI opportunities.

Yeah, thanks for the question, Bruce. Um, you know what I would say, and I think it's served us well, certainly in my 12th year with the company, right, is we have a very disciplined capital allocation model. And as you can see from our results,

Damon Lee: So they certainly command a large portion of our allocation because the return is there. And then certainly M&A and buyback become part of that equation. As you've seen, we have bought back stock in Q1 and Q2. There's certainly a higher probability this year than there was last year on a continuation of that buyback. And make no mistake, we're kicking the tires on inorganic opportunities, I would say every week, right? So we're certainly not dormant on looking at inorganic opportunities. But as Dave has reminded, every investor we talk to and many of you, we're not going to make a mistake on M&A, right? It'll be the right acquisition. And when it is the right acquisition, we will pull the trigger.

the organic opportunities we have internal. Um, you know, certainly uh are attractive, right? And certainly get, you know, top billing from a, from an investment perspective. Um, so I'll just recap our allocation strategy and I, I'll touch on m&a as I go through that. So certainly maintaining our investment grade balance sheet is is a top priority, you know, maintaining and growing our dividends at top priorities. As I mentioned, just just now, um, you know, our ruining team have a have a very deep deck of opportunities. That's why we keep talking about early Innings, because the, the organic pipeline of opportunities is very deep and they're very high Roi opportunities. So they certainly command, uh, a large portion of our, our allocation because the return is, is there. Um, and then certainly m&a and and buyback become part of that equation, as you've seen, we have bought back stock in q1 and Q2. Uh, there's certainly a higher probability this year than there was last year on a continuation of that.

Damon Lee: But in the meantime, we feel like we have a really good capital allocation strategy, and the organic opportunities that have yielded great growth and margin benefits are still plentiful, and that continues to be a focus.

Of that buyback. Uh, and make no mistake, we're kicking the tires on inorganic opportunities, I would say, every week, right? So we're certainly not dormant in looking at inorganic opportunities, but as Dave is reminded, um, every investor we talk to, and many of you, uh, we're not going to make a mistake on M&A, right? It'll be the right acquisition, uh, and when it is the right acquisition, we will pull the trigger. But in the meantime,

We feel like we have a really good capital allocation strategy, and the organic opportunities that have yielded great growth and margin benefits are still plentiful. That continues to be a focus.

Arun Rajan: Yeah, it makes a lot of sense. Thank you.

Okay, makes a lot of sense. Thank you.

Operator: Our next question is from David Hicks with Raymond James.

Operator: Good afternoon. Thanks for taking the question. I just wanted to, I know it's a smaller part of the business, but I wanted to hit on customs. I guess it's outside the impact in the quarter with record gross profits, and I think the most absolute growth among your service lines this quarter. Can you maybe unpack kind of what's driving the strength? Is it more of a transitory benefit from tariff complexity and elevated compliance needs, or are you seeing more kind of structural improvements from here as long as tariffs are in place?

Our next question is from David Hicks with Raymond James.

Uh good afternoon, thanks for taking the question. Um I just wanted to I know it's a smaller part of the business but I wanted to hit on Customs because it's outside the impact in the quarter. Um with rocket growth profit and I I think the most absolute growth among your service lines. This quarter

Um, can you maybe unpack kind of what's driving the strength? Is it more of a transitory benefit from tariff complexity and elevated compliance needs? Are you seeing more kind of structural improvements from here as long as tariffs are in place?

Damon Lee: Yeah, thank you for the question, David. You know, what I would say is, look, we pride ourselves on being able to meet our customers where they're at, both on a global offering perspective as well as a full suite of offerings, as well as it relates to customs and duties. And as you can imagine, we've had a lot of activity in the customs space with all of the uncertainty and just range of variability that's gone on. And certainly that's benefited us. We've been able to benefit our customers by offering them a key value-added offering during this period of time, and we've benefited from that offering. What I would say is the sustainability of the customs performance is highly dependent on the tariff environment, right? And so I don't think any of us know where that's exactly going to land in the next 6 to 12 months.

Damon Lee: I think the one thing we can probably be confident in is that the customs complexity is probably not going to go away in entirety, right? There's going to be some level of advanced customs level and complexity as we go forward, and we'll certainly benefit from that complexity and that volume. So what I'd say is there's no way to guarantee will the Q2 levels of customs continue into the future. We believe our customs activity will continue to be elevated. To what level will depend on the tariff environment going forward.

Yeah, thank you for the question David. You know what I would say is, look, we we pride ourselves on being able to meet our customers where they're at both, you know, on a, on a global offering perspective, as well, as a full Suite of of offerings, as well as it relates to, to customs and duties. Uh, and as you can imagine, we've had a lot of activity uh, in the custom space uh with all of the uncertainty and and just range of of variability that that's gone on and certainly that's that's benefited us. We've been able to benefit our customers by offering them, a key value, added offering during this period of time. And and we've benefited from from that offering, um, what I would say is the sustainability of the Customs performance is highly dependent on the Tariff environment, right? And so, um, I don't think any of us know where that's exactly going to land in the next 6 to 12 months. I think the 1 thing we can

Probably be confident in. Is that the customs complexities? Probably not going to go away in entirety, right? There's going to be some level of advanced.

Operator: All right, great. Appreciate the time.

Customs level and complexity as we go forward and we'll certainly benefit from that, uh, benefit from that complexity and that volume. So what I'd say is there's no no way to guarantee will the Q2 levels of Customs continue into the future. We believe our customs activity will continue to be elevated at to what level will depend on the the Tariff environment going forward.

All right, great. I appreciate the time.

Operator: Our next question is from Jeff Kaufman with Vertical Research Partners.

Our next question is from Jeff Kaufmann with Vertical Research Partners.

Paul (Operator): Thank you very much. Well, first of all, congratulations. These are terrific results in a tough environment. I'm just kind of curious, and I think, David, you mentioned this in your earlier commentary about some of the opportunities you were seeing in the market. But I'm just kind of wondering, you know, how is the table shifting with all the uncertainty out there, and what new opportunities are you seeing for the company that maybe weren't as visible 6 to 9 months ago?

Thank you very much. Well, first of all, congratulations, these are terrific results in a tough environment. Um, I'm just kind of curious and and I think David you mentioned this in your um, earlier commentary about some of the opportunities you were seeing in the market. But I'm just kind of wondering, you know, how is the table shifting with all the uncertainty out there and and what new opportunities are you seeing, uh, for the company that maybe weren't as visible 6 to 9 months ago?

Chuck Ives: Hey, Jeff. I just want to clarify in the comments, I think your opportunities that we spoke of, it's really about our continuous improvement opportunities of the company that we have. I mean, Damon just spoke to the potential inorganic versus organic opportunities, and I think he covered that really well. I'll have Arun talk a bit more about something we're really excited about as we continue on this journey and on how it kind of separates us on how we're looking at the company overall structurally. But Arun, you want to expand a bit on that opportunity?

Opportunities, um, that we spoke of. It's, it's really about our continuous Improvement opportunities of the company that we have. I mean, Damon just spoke to um the the potential, you know, inorganic versus organic opportunities. And I think he covered that really well right?

Arun Rajan: Yeah, you know, you heard both, well, everyone here has talked about gross margins and operating margins and, you know, how much opportunity we have going forward. And the opportunity lies in the way we've approached this. We've used things like machine learning and traditional software engineering techniques to drive our dynamic pricing and dynamic costing, so our algorithmic pricing and costing and yield management to drive all of our productivity improvements of 35% over the last couple of years. And so the way we think about it is, you know, we need, we are, and we will continue to disrupt from within with technology. We've been doing it with all the tools that were available: traditional software engineering, data science, Gen AI. I think the big opportunity on the horizon for us to continue that evergreen productivity and continued optionality and gross margin and volume trade-offs is Agentic AI.

Um, I'll have uh I'll have a room talk uh a bit more about something we're really excited about as we continue on this journey and on on how it kind of separates us on how we're looking at the cam company overall structurally. Um but a room. You want to expand a bit on that opportunity. Yeah. You know, you you heard both uh well, everyone here has talked about for gross margins and uh, operating margins and you know how much opportunity we have going forward. And and, and the opportunity lies in the way we've approached this. We've used things like machine learning and traditional software engineering techniques uh, to drive a dynamic pricing and dynamic costing. So our algorithmic pricing and costing and yield management to drive all of our productivity improvements to 35% over the last couple of years.

Arun Rajan: We are, you know, we're well set with all the investments that we've done in the past few years to build our muscle. That combined with our operating model creates a significant opportunity going forward.

Damon Lee: Yeah, Jeff, I would just add, kind of tagging on to what Dave was talking about, is, you know, a lot of times, look, we've had great success on productivity. It shows up in our margins. It gets most of the attention. I think the one thing that our efforts don't always get highlighted is the ability to outgrow the market, right? So certainly all of the technology improvements, all of the productivity improvements, they've also improved our ability to serve the customer. We're able to get to more quotes than we ever got to before. We can provide a better service level to the customer, and all that has led to our ability to outgrow the market. So as Michael spoke to earlier, we outgrew the CAS index for both truckload and LT on the quarter. That's been a continued trend now for many, many quarters.

And so, the way we think about it is, you know, we need, we are and we will continue to disrupt from within with technology, we've been doing it with all the tools that were available traditional software, engineering data, science, uh, gen AI. I think the big opportunity on the horizon for us to continue that Evergreen productivity and continued optionality and, and gross margin and volume. Trade-offs is is a genetic AI. Uh, we are, you know, we're well Set, uh, with all the Investments that we've done in the past few years to build our muscle uh that combined with our operating model uh creates a significant opportunity uh, going forward.

Okay, Jeff. I would just add a kind of tagging on to what, what Dave was talking about is, you know, a lot of times, look, we have a great success on productivity. It shows up in our margins, it gets, most of the attention. I think the 1 thing that our efforts doesn't always get highlighted, is, is the ability to algorithm the market, right? So, certainly all of the

All of the technology improvements, all the productivity improvements they've also improved, our ability to serve the customer. We were able to get some more quotes than we ever ever got to before. We can provide a better service level to the customer and all that is led to our ability to outgrow the market. So as Michael spoke to earlier, we outgrew the cash index,

Damon Lee: And that's a little bit of the narrative that gets lost is the outgrowth, right? And so you think about, you know, everything the Robinson team's been able to deliver. Certainly, we've benefited greatly from the productivity at the operating margin level, but all the effort around revenue management, around price optimization, cost-to-hire optimization that's benefited our gross margins. And then on top of that, it's unlocked potential on being able to outgrow the market as well. So it's really, you know, our strategy is allowing us to win on both growth, gross margin, and operating margin. And as Arun just spoke to, a lot of that was on the back of Gen AI. We think Agentic AI is the next phase of that kind of breakthrough productivity. So we're really excited about what the next 12 to 18 months holds.

For both truckload and LT in the quarter, that's been a continued trend now for many, many quarters. And that's a little bit of the narrative that gets lost is the outgrowth, right? So if you think about...

You know, everything the Robinson team has been able to deliver—we've certainly benefited greatly from the productivity at the operating margin level. But all the effort around revenue management, price optimization, and cost to higher optimization has benefited our gross margins. On top of that, it's unlocked potential on being able to outgrow the market as well. So it's really, you know, our strategy is allowing us to win on both growth.

Gross margin and operating margin. And as Arun just spoke to a lot of that was on the back of gen AI we think. Agentic AI is the next phase of that of that kind of breakthrough productivity. So we're we're really excited about what the next 12 to 18 months holds

Paul (Operator): Thank you very much.

Thank you very much.

Chuck Ives: Thanks, Jeff.

Thanks chef.

Operator: Thank you. Our last question is from Jonathan Chapel with Evercore ISI.

Thank you. Our last question is from Jonathan Chapel with evercore isi.

Operator: Thank you. Good afternoon. Kind of on that same thesis, but maybe outside of your core knitting a little bit, you've done so much with what, you know, C. H. ROBINSON had when you arrived as a new management team. We're seeing some brokers really kind of increase their interest in financial offerings now. And I'm sure you have some, but can you just remind us about your capabilities of some of the financial offerings, fintech, so to speak? And is there a competitive advantage that you see either getting bigger in that or maybe just kind of keeping to your core knitting?

Thank you. Good afternoon. Um,

Kind of on that same thesis. Um, but maybe outside of your core knitting a little bit, you've done so much with what, you know, C.H. Robinson had when you arrived as a new management team. We're seeing some brokers really kind of increase their interest in financial offerings now. Um, and I'm sure you have some, but can you just remind us around your capabilities of some of the financial offerings, um, fintech so to speak? And is there a competitive advantage?

That you see either getting bigger in that or maybe just kind of keeping to your coordinating.

Dave Bozeman: Yeah, hey, John, this is Michael. Appreciate the question. You know, we announced certainly, you know, Robinson Financial. It's probably been just over a year ago, probably was just a year ago. But it was really around driving value to the carrier community. You know, if you're a carrier, getting paid accurately, quickly, getting access to the right freight, getting, you know, keeping your trucks moving, all of those together create an ecosystem that we think is the best in the industry. And so admittedly, while we had the most loads to offer anybody in the industry, I think we had the best people and logisticians to match that freight up. But we were missing that extra component of adding that financial support to the carrier. And that's really why we announced our partnership with Triumph about a year ago.

Dave Bozeman: And now we're offering industry-leading, you know, carrier payment programs and other financial services. And we expect those services to evolve and continue to develop. We want to be the place that carriers choose to move their equipment. And we believe the combination of services we offer with the most freight to offer really gives us, again, another point of differentiation in the marketplace.

Offering industry-leading, uh, you know, carrier payment, programs, and other financial services. And we expect those services to evolve and continue to develop. We want to be the place that carriers choose to move their equipment. And, and we believe the combination of services we offer with the most Freight to offer really gives us again. Another point of differentiation in the marketplace.

Operator: Great. Thanks, Michael.

Great. Thanks. Michael.

Operator: Thank you. This concludes our question and answer session. I'd like to hand the call back over to Chuck Ives for any closing comments.

Thank you. This concludes our question and answer session. I'd like to have a call back over to Chuck Ives trying to closing comments.

Michael Castagnetto: Yeah, that concludes today's call. Thank you, everyone, for joining us today. We look forward to talking to you again and have a great evening.

Yeah, that concludes today's call. Thank you, everyone, for joining us today.

We look forward to talking to you again, and have a great evening.

Operator: Thank you again for your participation. You may now disconnect.

Thank you again for your participation. You may now disconnect.